Entry deterrence when the potential entrant is your competitor in a different market

2020 ◽  
Author(s):  
Miguel Ángel Ropero
Keyword(s):  
Entry Deterrence ◽  
Potential Entrant

scholarly journals Spatial Competition with Entry Deterrence considering Horizontal Product Differentiations

2013 ◽  
Vol 2013 ◽  
pp. 1-6
Author(s):  
Ai-nong Zhou
Keyword(s):  
Game Theory ◽  
Spatial Competition ◽  
Dynamic Game ◽  
Transportation Cost ◽  
Theory Model ◽  
Entry Deterrence ◽  
Setup Cost ◽  
Middle Point ◽  
Potential Entrant ◽  
Linear City

Spatial competition plays important roles in economics, which attracts extensive research. This paper addresses spatial competitions along with horizontal product differentiations and entry deterrence. By the dynamic game theory model about one firm and a potential entrant with different cost in a linear city, this paper finds that both the higher fixed setup cost and the higher transportation cost deter entrants. To efficiently deter the entrants, the establisher is inclined to locating at the middle point of the linear city.

scholarly journals The Signaling Role of Subsidies

2015 ◽  
Vol 15 (1) ◽  
pp. 157-178 ◽  
Author(s):  
Félix Muñoz-Garcia ◽  
Ana Espinola-Arredondo
Keyword(s):  
Social Welfare ◽  
Complete Information ◽  
Entry Deterrence ◽  
Output Level ◽  
Potential Entrant ◽  
Incumbent Firm ◽  
Pooling Equilibrium ◽  
Separating Equilibrium

Abstract This paper investigates the effect of monopoly subsidies on entry deterrence. We consider a potential entrant who observes two signals: the subsidy set by the regulator and the output level produced by the incumbent firm. We show that not only a separating equilibrium can be supported, where information about the incumbent’s costs is conveyed to the entrant, but also a pooling equilibrium, where the actions of regulator and incumbent conceal the monopolist’s type, thus deterring entry. We demonstrate that the regulator strategically designs subsidies to facilitate, or hinder, entry deterrence, depending on which outcome yields the largest social welfare. Furthermore, we compare equilibrium welfare relative to two benchmarks: complete-information environments and standard entry-deterrence games where the regulator is absent.

scholarly journals Entry Deterrence in a Duopoly Market

2007 ◽  
Vol 7 (1) ◽  
Author(s):  
James D. Dana ◽  
Kathryn E. Spier
Keyword(s):  
Market Price ◽  
Entry Deterrence ◽  
Cost Advantage ◽  
Cournot Duopoly ◽  
Potential Entrant ◽  
Sequential Game ◽  
Duopoly Model ◽  
Costs Of Production ◽  
Homogeneous Good ◽  
Duopoly Market

Abstract In a homogeneous good, Cournot duopoly model, entry may occur even when the potential entrant has no cost advantage and no independent access to distribution. By sinking its costs of production before negotiating with the incumbents, the entrant creates an externality that induces the incumbents to bid more aggressively for the distribution rights to its output. Each incumbent is willing to pay up to the incremental profit earned from the additional output plus the incremental loss avoided by keeping the output away from its rival. This implies that the incumbents are willing to pay up to the market price for each unit of available output. A sequential game in which the incumbents produce first is analyzed, and the conditions under which entry is deterred by incumbents' preemptive capacity expansions are derived.

Capital Structure and Entry Deterrence with Multiple Incumbents

2007 ◽  
Vol 7 (1) ◽  
Author(s):  
Jorge Antonio Tarzijan
Keyword(s):  
Capital Structure ◽  
Entry Deterrence ◽  
Cournot Duopoly ◽  
Two Stage ◽  
Potential Entrant ◽  
Strategic Actions ◽  
Duopoly Model ◽  
Strategic Role ◽  
Alternative Markets ◽  
A Company

Abstract This paper uses a two-stage Cournot duopoly model with demand uncertainly to examine the strategic role debt plays in deterring a company from entering when a potential entrant can enter one of several markets. We show that as the number of alternative markets available for entry rises, the incumbents' incentive to use debt as a deterrent falls. Thus, a potential entrant will prefer to have a larger number of alternative markets to enter in order to lower the incumbents' incentive to take strategic actions against it.

Spatial Monopoly, Non-Zero Profits and Entry Deterrence: The Case of Cement

1983 ◽  
Vol 65 (3) ◽  
pp. 431 ◽  
Author(s):  
Ronald N. Johnson ◽  
Allen Parkman
Keyword(s):  
Entry Deterrence

Why do firms oppose entry-deterring policies? Environmental regulation and entry deterrence

2014 ◽  
Vol 20 (2) ◽  
pp. 141-160 ◽  
Author(s):  
Ana Espínola-Arredondo ◽  
Félix Muñoz-García
Keyword(s):  
Environmental Regulation ◽  
Entry Deterrence ◽  
Social Planner ◽  
Policy Regimes ◽  
Incumbent Firm ◽  
The Social ◽  
Emission Fees

AbstractThis paper investigates the design of environmental regulation under different regimes: flexible and inflexible policies. We analyze under which settings strict emission fees can be used as an entry-deterring tool, and become socially optimal. Furthermore, we demonstrate that the incentives of the social planner and the incumbent firm are aligned regarding policy regimes ifentry can be easily deterred by setting a stringent regulation. Their incentives, however, can bemisaligned when entry becomes more costly to deter, leading the incumbent to actually preferenvironmental policies that attract entry.

Limit pricing with complementary goods

2011 ◽  
Vol 6 (2) ◽  
pp. 215-224 ◽  
Author(s):  
Jorge Tarziján
Keyword(s):  
Dynamic Game ◽  
Entry Deterrence ◽  
Managerial Implication ◽  
Content Type ◽  
Limit Pricing ◽  
Equilibrium Limit ◽  
Multiple Markets ◽  
Limit Price ◽  
Complementary Product ◽  
Complementary Goods

PurposeThis paper aims to examine the equilibrium limit price charged by a producer trying to deter the entry of a firm that can choose one of the two markets of complementary goods.Design/methodology/approachThe authors model a dynamic game of incomplete information solved using a “perfect Bayesian equilibrium” approach.FindingsIt is shown that an incumbent will be willing to spend more resources – i.e. charge a lower limit price – to deter entry into its market as products become more complementary. This is because additional benefits are gained from entry deterrence by facing a more competitive market in the complementary product. The additional benefits of entry deterrence are shown to be a function of the degree of complementarity between goods.Practical implicationsA managerial implication of this article is that firms are willing to compete more fiercely to send an entrant to the other's incumbent market as the degree of complementarity between goods increases. An interesting conclusion that is derived from the above analysis is that managers should invest to understand the interdependences (e.g. complementarities) of the goods they sell, since the strategic variables chosen to compete may be affected by them, in some cases in a non‐trivial way.Social implicationsFrom a public policy perspective, the main contribution of this paper is to point out that regulators who analyze predatory pricing, or other (probably) illegal “low‐price strategies”, should consider the degree of complementarity between goods and its effect on pricing.Originality/valueAs far as the authors' knowledge goes, there are no other papers that analyze entry decisions involving multiple markets of complementary goods.

Sign in / Sign up

Export Citation Format

Share Document